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tv   [untitled]    February 17, 2015 4:00pm-4:31pm PST

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advanced enough that we could consider them in the outlook. the low case takes a darker turn and considers what would happen if we did face an economic downturn and reduced our revenue, our percentage rates, down to fiscal year 10-11 levels and considered that leasing would go at a slower rate and since piers 19 and 23 are two key areas that we're looking to lease, what would happen if we delayed the timing of filling those spaces. then the high case goes into more detail of considering projects that are still on your horizon for final approval as well as capital spending so the last item on this ayen today item for the capital supplemental will actually bring more revenue and will add to the high case scenario. but as elaine pointed out, we
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definitely were taking into account the operating reserve so each scenario actually meets the 15 percent operating reserve, as well as the capital plan requirement or capital policy requirement, excuse me, of 20 percent for the first two years of the plan and then increasing to 25 percent in the later end of the plan. so first looking at the base case, you can see that the first, the lighter blue are the sources and the darker blue are the uses and the green that just eeks up there at the bottom is our surplus. this is a better projection than in prior years of the financial plan where i had shown you deficits in the out years and the need to curb operating expenses and increase sources and i think the key difference is that we are being prepared to put new facilities online and generate more revenues and, frankly, the economy has been doing well and this is a
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reflection of that on-going income stream. i think notably this shows 14.7 million of average capital spending. that is definitely higher than in prior years where i think if port staff had been asked what we generally spend it would be 10 or 11 million, so this is an improvement. but the take away, particularly given how the surplus declines in later years, is that we need to continue to look at our revenue case. in the low case where we apry a production of percentage rates and delay leasing of the facilities, the forecast does show an average $4 million average deficit in the out years. but i continue to apply the assumption that we would be using our capital requirement so what this really means is a deficit to our operating budget so this really calls on that
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trade-off saying we are committed to meet our policy requirements for capital so if we face a deficit, we are going to need to find reductions to our operating xerpbses. finally looking at the high case, this applies an assumption that we would go ahead and get approval to move forward with the capital projects that are coming up for you next, as well as current projects that are underway to get, to have lease arrangement such as 31 1/2 with the national park service and just other upsides such as cruise, assuming we had more than expected cruise calls and were able to generate more revenue at pier 27. this chart is to show the comparison of the deficits and surpluses in the three different scenarios. as you can see, the high case is essentially the opposite of the low case by the end of the
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situation, of the 5 year forecast. and comparing the capital impact you can see that 2016 shows an unusually high amount of spending and that has a truck he will down trickle down effect in later years. essentially what is happening is they are flowing directly into capital spending. the main take aways is that the economy is strong we are expecting it to continue in the base case of this forecast, but it really does rely on our ability to move forward with leasing facilities and moving forward with development projects. we do need to continue having our mindset of controlling operating expenses. we are going to continue to meet our policies for the operating reserve and capital spending, but increasing our revenue base really is a priority in any scenario. just
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imagining if you were able to apply the assumptions of the high case of renovating properties and increasing our revenue base, that would protect us even further in the case of a low scenario where we face an economic downturn. with that i'm going to hand it over to daly dunham >> good evening, commissioners, daly dunham with the special projects group. i'm here presenting the 10 year capital plan for the, i think this is my 8th time presenting but the 9th iteration of the capital's 10 year capital plan. we're here looking at one of the great accomplishments of the last year, pier 64 pile removal, a little bit of water in the
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background. so dove tailing with what deputy director forbes had said, how does the 10 year plan fit in with these other documents? at the most mundane level it is how we show what our capital need is and that is in great detail in appendix a. it itemizes every facility that we've got. incidentally, when winnie was going through that need showing numbers i was flipping through appendix a and they do align. it is a guiding document for the port's investments, what we do with our resources. together with the item before it that lets us look at the trajectory. a renrexz of the port's values, elaine said that earlier. when we take the most
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valuable resources that we have because they have no strings attached, the port's capital funds, we put them through this criteria attached in appendix b which the commission approved every year and it recommends where we're going to go it has relative values on things like the port's mission and revenue generation and risk management. this will fold into the city-wide 10 year capital plan of other city departments and lastly it is an important point where the public can interface with our strategic thinking. so to take a victory lap, what we did over the last year, $220 million of investment, we have the james r. herman cruise terminal, (inaudible) spectacular effort very much informed in this year's iteration of the 10 year plan.
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removal of a substantial source of waterfront blight that spent most of its years in the southern waterfront, removal of die dock no. 1 and then the beautiful bayview rise. in terms of the plan reflecting our values and the scoring criteria, this is a slightly duchbt take -- different take on what's included maritime uses and the ability to leverage additional funding. so where are we this year as opposed to last year? i think the key numbers to focus in on here are the $79 million, nearly $80 million dollars that we're faced with about every year just in escalation, cost escalation of 5 percent, further dmrerb identification for what's in our backlog or price escalation on our renewal costs going forward. we are
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beating that number which is really great, but in the reduction, the $89 million reduction, that number coming off our books unfortunately a lot of that had to do with the golden state warriors moving and a lot of refinement to our project numbers with new performance coming out and updated numbers there. it's about $30 million more than last year. where that money goes, apologies for the drifting letters there. i think it's different versions of powerpoint is causing that. that wasn't in the version we completed. but interesting here that they are roughly equally spaced. the one-time cost there, 29 piece, is really bits and pieces of the other 3 seismic backlog and renewal,
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mostly concentrated in pier 70. so mostly what you're looking at in one-time costs are pier 70 structures. i like this chart because it highlights what we do with our money depends on where we get it from. if it's our own money it's internally generated we tend to fix stuff that we already have, trying to take care of what we've got. when they come externally primarily from development there's much more emphasis on enhancing the waterfront. a more detailed look at our funding sources. that development projects add 295 million still is the largest chunk of our external funding sources. on the internal side it is remarkable that the port capital budget is now the biggest piece of the pie there.
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that will vary from year to year based on the tenant improvement, those kind of go up and down based on what systems are expiring each year, but it's a significant development. this is more detailed look at how we use our funds, breaking this down between repair and enhancement by funding type. there's a big number there, $117 million for federal, state and local grants for enhancement. that's almost entirely the wida project for expanding the ferry project. these are development projects just by project so you get a sense of where funding is coming from, seismic being a very small piece of the for city work, but notably absent from there is the golden state warriors at pier 30-32 which did a lot to repair that
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facility. but no longer. the republic numbers going around with that development and some revisions to all of our estimates at pier 70. the size of that bar, top to bottom, is what our overall need is, and it's grown by in the most current year only 2 percent so it really is only about $30 million more than the prior year, excepting last year as something of an anomaly we do continue to show steady progress. incremental, not hue
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homongus, but steady progress. that's where i'd like to close it and i'll hand it to megan >> megan wallace, port finance, and i'd like to go over our port capital supplemental. so this is the second year of a fixed two-year budget. the port staff were able to identify additional funding, notably from the pg&e prepayment as elaine mentioned earlier. we have 15.3 million of additional funds from that deal, as well as 4.2 million of savings from previously approved capital projects. so the sum of those items really enable us to go ahead and request a 19 1/2 million dollar increase to our 15-16
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capital budget. this chart is to show you what you had previously approved first fiscal year 15-16, the total budget is currently 12.8 million. as you can see the bulk of it is for dredging which is fairly typical that we spend at least $5 million or so for our annual dredging needs. we also are doing some pier structure repair projects and then the other parts are allocated in the northern and southern waterfronts as well as other general port-wide projects. so the proposal before you today is to move forward with requesting an appropriation of those funds to the fiscal year 15-16 budget and port staff underwent a process to identify 7 priority projects that we thought met the most critical priorities. the bulk of it is in the southern waterfront and these projects, port maritime,
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they leverage federal dollars and they are revenue generated. just quickly to go over what these 7 projects are, first is the back lands project. it's a project that should be familiar with you, it had previously been on the port's books but we ended up shifting the funds to finance the port's contribution to the america's cup improvements. this project will improve the site for construction lay down parking, and storage sites. it will activate the southern waterfront and port finance has determined that over 10 years it will generate a net revenue of 8 1/2 million dollars, which for my 5 year financial plan i could say directly feeds into additional capital spending. the second project is the bie electrical separation so at
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pier 70 the current power site is in building 102, which is an orton development site. the bae needs to have a separate electrical source so this project would create a new service station and mitigate existing, an existing pcb transformer which is currently -- if you are familiar with pcb's, it definitely needs to be managed and by moving to a new power source will give bae a cleaner and safer power supply. this will enable bae to continue with their work at pier 68-70 and as you know that's critical to our maritime mission. the third project is central basin dredging. this is a 2.9 million project which is the port's portion of a over 15 million project that will
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dredge the basin to a depth that will enable very large ships to come into the dry dock. this is leverage 10 million of army corps of engineers funding and the deal we are currently working on is bie would contribute $2 million as well. once this is done the army corps of engineers would continue dredging the site which could have millions of dollars that the port would not have to invest every decade or so. the quipb street lead project is another project that's been before you. it originally came as an accept and expend to use federal railroad association grant dollars, $3 million dollars, the port match was originally $300,000 but unfortunately the project has increased in cost now we've gotten farther along in design,
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but is did will support maritime cargo and also be a good project for the southern waterfront. the pier 23 roof is a project that will not only help protect had historic facility but port staff have found we could increase the rent at that site by 50 cents if we go ahead and upgrade the facility. and the seawall study would be $1 million. you previously approved $500,000 for this project. we are currently underway with it in fiscal year 14-15. this funding will get it through the full initial stage of assessing the seawall and marginal works. finally, there's an environmental investigation currently underway at pier 39.
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this additional funding would enable a follow-up study that we expect to need to do through the request of the regional water quality control board. so these charts are being revisited from the 5 year financial plan because i want you to be able to see that the proposed projects help support the port's financial position. it was in the high scenario that we included the additional revenue that would be generated from the back lands project and some pier 23 leasing, and this chart helps show the additional revenue from those projects in the 5 year window would be just over 7 million dollars. so i'm requesting today to increase the port's capital budget for fiscal year 15-16 by 19.4 million dollars for a total of 32.2 million, which is
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really quite a large amount, by port capital budget standards .d it may actually be the largest amount. and we'll be addressing some key priorities such as activating the southern waterfront, supporting our maritime industry, as well as the port's financial position and restoring some historic facilities. thank you. >> public comment? seeing none, public comment is closed. i just want to thank all of you. your presentations really are just all extraordinary and very much appreciated. it takes what can be a dry topic or information and makes it very presentable and informative so i want to thank you all very much for that. i know an awful lot of work went into making it so easily
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digestable for those of us here, so thank you. commissioner brandon, do you want to --. do you need to leave soon? >> go ahead. >> thank you very much. this was a great presentation, it was a lot of information. and you guys have done a wonderful job and congratulations on meeting a hundred million, that's wonderful. and all that we've done with everything that we've accumulated over the last few years. i personally won't want to invest the 19 million back into the port facility and not just set it aside. i think you guys have come up with great options to do that that will be really beneficial. one question i have that's stuck in my mind that i can never remember is the pilings. are all the piling removals
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funded in the southern waterfront? and if not, can we make sure that we allocate some portion of this to pile removal? >> or turn them into art. >> my understanding is all the pile removal is not funded. we do have a plan utilizing our pile driving crew to do some of the work and are making good progress on it. what we can do is report back to you about how our progress will go next year and continue to fund the effort moving forward. if you'd like us to come back and make a suggestion to defund something included in the 19.5 million supplemental to augment it we could go back to the drawing board on that. my understanding is we have a funded program that's moving forward next year but we don't have all of it fully funded to be accomplished next year. >> it doesn't have to be
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accomplished next year, i just want to be sure it's in the pipeline and funded sometime in the next few years. >> and david is reminding me we have a funding issue. we need an army corps permit that is taking some time to receive. even if we were to fully fund it next year, it would be sitting until we can get that permit issue resolved and get to work on the program. >> can you give me an approximate idea of what's unfunded? >> i'm going to ask my colleague, david to answer that question. >> david from funding and development. what we do have is all the pile removement west from third creek to slay's creek. where we need additional funding for pile removal is the area around the grain silos directly under the grain silos, the pier 96/terminal and then be pier 70
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wharf 8. pier 70 wharf 8 we do have a federal request in through werda >> water resource --. >> yeah, water resources through the army corps of engineers, so we're hoping we may get some funding for that as well. but as elaine mentioned we have begun the permitting process through the army corps of engineers for removal and reanticipate that ideally to get a permit within the next 12 to 18 months that would allow us to do that removal. >> so approximately how much is still unfunded? >> i will need to get back to you on that and i can do that. >> i think you have come up with great suggestions on what to do with the funds, but i did request a few months ago that we consider making that a part of it, because that has been an outstanding issue for a long
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time. thank you. >> i think today was really great in terms of having everything kind of presented to us so i want to thank, the fact that we had the facility assessment to the 5 year financial plan, capital plan and obviously what you want to do with the incremental funding available on the capital projects. i would concur with commissioner brandon that i think we should invest rather than put aside because i think there is the benefit of moving forward more quickly and then this is a gift that keeps on giving so i think that's an important aspect so i support that. but i think in looking at some of your financial scenarios and understanding between the base case and the low case and the high case, so it seems, you know, if there's a swing to the low case, which is obviously not something we hope that would happen, but it looks like you are assuming that that
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comes just from more or less lease revenue as well as lower cruise volume is the primary drivers of the lower revenue. and i guess you do have some offsets in terms of things you could do and i'm just wondering, i think we want to figure out if we ever saw that trend happening how we can offset that more in terms of -- and i know you heard me talk about that, whether we would look at other sources of revenue even if we had lower volume of cruise ships whether we would go with a higher facility fee or passenger fee. i think we need to offset that because the swing is not something we want to consider. i think your high case is still conservative because you are just looking at 2 percent in revenue, which is not really a high case. the other thing we have not heard yet, i guess you are saying some additional revenue from the events at pier 27, i
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think we have asked to hear back with our experience is so far with the cruise ship terminal so we understand whether that's panning out at as better or worse or about what we expected. that's another variable and i'm looking at all the variables you can use in these scenarios in the 5 year financial plan to generate as much as we can so we can put more in the capital side as much as we can and we are making progress and i appreciate with daly has done with the capital plan. we're making progress but see eepl also to be treading water a little bit every time we look at it. it comes back to either cost escalation or something else comes up. we are making progress and we are still treading water a little bit and we want to move forward, look like we've made a little progress rather than just standing still with new things, even though it's good to hear that we don't have more red
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tagged facilities and things on the yellow tag are somewhat stable, moving more to green, but somehow the numbers keep standing still to us so we're not making as much progress as we'd like. i appreciate you have given us a clear picture. i can't say that i have detailed questions except i think your base case scenario makes sense. i think we have to be prepared for the low case because you always have to be prepared for what will happen. i don't think we hope that will happen in san francisco. on the high case i think there could be opportunity to do better. >> agreed, thank you so much for your comments. on the high case we assumed, you may recall from the cruise terminal conversations, that they are really base. low cruise, high events, high events, high cruise. there were really 5 scenarios and we modeled the incentive 3 base and low cruise, high events, high
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cruise, high event. we didn't model high cruise high event. you are saying, which was your comment, the high case could be more aggressive and we tend to be conservative in how we do our projections but that's a very good point. i believe we will be coming in may. >> may 12 when the terminal will be about 6 months old. >> to talk about how the cruise ship terminal -- how pier 27-35 is performing relative to the scenarios that you saw. i would also say the low case for me feels like a very, very low case scenario. i hope that we won't be solving for that level of deficit in the near term, but the economy could always do something dramatic which would more match prior cycles. >> right. well even if we use a base case, i should also echo what commissioner brandon said and say congratulations because i think i threw out the hundred million dollar target a
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few years ago and at that time it looked like it was really a very stretch goal but it's very close to reality. i think eventually we'll throw out another target, right, and hopefully reach that. my guess is that even with base case economic scenarios you may do better than what you think on the revenue side and hopefully you will throw more down to the surplus side so we can have more funds available for capital and that we can keep our operating costs in line. so i think that's really positive. the other question is, you know, at some point, not in your presentation but it does remind me to understand what's happening with 23 and 29 and how we can move that on stream. so with the 19-23-29 is that on deck at some point monique to come back and tell us. >> you got to see today that we have substructure issues at 29 so, no, it's not due to come back yet but we are working on it internally. >> is that one way to

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